The state has abandoned the introduction of a tax on extra profits in the energy sector

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Although the President of Serbia, Aleksandar Vučić, announced the possibility of introducing a tax on extra profits in the energy sector, the authorities apparently gave up on that idea.

As a reminder, at the beginning of October, Vučić emphasized that the authorities in Serbia are thinking about introducing a tax on extra profits for those who in the previous period made huge profits from renewable energy sources, in order to reduce the negative effects of the world energy crisis. That this will not happen after all, is confirmed by the statement of Sinisa Malog, Minister of Finance of Serbia, given in an interview with the daily newspaper Politika, that at the moment the possibility of introducing a tax on extra profits is not being considered.

He justified this by saying that such a measure would cause “shocks or negative reactions”, in other words, it would have a bad effect on the economy in the country.

What confuses the public in this particular case is that Mali justifies the intention not to introduce a tax on extra profit by the Government’s desire to protect the interests of the economy at a time when the prices of electricity used by that economy in its production process are continuously rising.

Energy expert Velimir Gavrilović tells Danas that there is very little room for collecting extra profits in Serbia’s energy sector.

– Given that state-owned enterprises such as Elektroprivreda Srbije, Elektromreža Srbije and Srbijagas operate at a loss, it is completely pointless to think that they could be additionally taxed. When it comes to producers of electricity from renewable sources, the problem in the first place for the owners of wind farms and solar power plants is that the state has stimulated them to build their production facilities in Serbia by subsidizing them, that is, by EPS paying for the electricity they produce at preferential, i.e. higher, prices. The question arises whether it is legally possible to impose an extra tax on companies to which you previously gave subsidies. If there is no legal problem in that matter, another one appears. And that is because foreign investors would stop investing in their construction in Serbia in case of the introduction of extra taxes for renewable energy sources. This is not in the interest of our country, which is forced to import electricity due to the lack of domestically produced electricity – explains our interlocutor.

He adds that the only company that could be charged extra profit in the energy sector is the Oil Industry of Serbia.

– Energy companies that make significant profits in crisis conditions are those that have their own sources, so they do not have to spend a lot of money on the purchase of energy products in the current conditions when their price is very high. This is also the case with NIS, which exploits oil and gas fields in Serbia, which enables the company to make high profits even in these conditions. Accordingly, a tax on extra profit could be introduced to NIS because that company makes it – says Gavrilović.

According to him, this tax could also be introduced for companies that are not in the energy sector and make extra profit thanks to low electricity prices.

– Electricity prices for the economy in Serbia are, objectively speaking, significantly lower than in neighboring countries. This means that large foreign companies operating in Serbia can earn significantly more money on this basis than they would be able to do anywhere else in Europe. Given that this extra profit is gained due to the low price of electricity, there are legitimate reasons for it to be prescribed. Also, the direction in which we should think, on this occasion, is to give up on electricity prices being the same for everyone in the economy. Which is why, for example, small and medium-sized enterprises that are threatened in the economic crisis would not be protected by the state in such a way that the price of electricity would not increase for them. On the other hand, Economist Milan R. Kovačević also believes that in the case of state-owned energy companies in Serbia, it is impossible to collect extra profit.

– How can you tax extra profit to EPS and Srbijagas when they don’t even have any profit and are operating at a loss. The oil industry of Serbia belongs to the category of companies where this can be done. Otherwise, the authorities in Serbia should come up with a tax strategy to fill the state coffers more efficiently, because the way it is done at the moment is not effective – Kovačević points out.

On the other hand, economic analyst Branko Pavlović believes that it is a good thing that the state has given up on the collection of extra taxes in the energy sector because, as he says, this is a bad solution from the very beginning of thinking about the subject.

– Simply, the authorities must give up trying to suppress the economic crisis by adopting administrative measures. In this way, the goal will not be achieved. Instead, the crisis should be solved by good and responsible management in energy companies, which would certainly bring adequate results – concludes our interlocutor, Danas writes.
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